TANF and Welfare Cash Assistance Block Grant

The Aid to Families with Dependent Children (AFDC) program was repealed in 1996 and replaced by Temporary Assistance for Needy Families (TANF). It was the most dramatic reform of welfare ever and proves that changing incentives can save money while improving delivery of services and beneficiary outcomes.

Transforming the open-ended AFDC entitlement into a capped and stable block grant to the states wasTHE structural change that created the powerful economic incentives that states needed to transform their welfare offices into work-promotion centers. This, in turn, drove welfare reform’s positive economic results for both low-income families and taxpayers. Federal strings, including time limits and work requirements, while symbolically powerful, played a much less important role in TANF’s success.62

The achievements of the TANF block grant also clearly demonstrate the fiscal benefit of not indexing federal programs. Over the last 15 years, funding for TANF has remained relatively stable at 1996 levels because its funding level was specifically exempted in the Welfare Reform law from the automatic increases provided most federal programs as part of the Congressional budget process each year. As a result, federal taxpayers have saved over $4.6 billion on TANF in just the latest fiscal year, 2012, and more than $42 billion since 1996.63

Congress has on occasion separately provided additional funds for TANF benefits as an emergency measure based on economic conditions. This should be the template for ALL federal programs instead of the current system whereby most programs receive an automatic annual increase without Congress having to vote to approve it — allowing members of Congress to avoid being held individually accountable by voters for increases in federal spending.

While TANF is the only program providing cash welfare assistance to the states, our review of the CFDA identified a number of ancillary programs that should be combined with TANF in a consolidated block grant.

These include five formula grant programs that fund supplementary assistance for child and family social services as well as child care. Another four programs provide funding to promote school readiness (Head Start), special projects to improve child support enforcement and the creation of job opportunities through non-profits.

A total of 11 programs comprise the proposed block grant that together cost over $31 billion at the federal level in FY2011 — not counting the federal government’s administrative costs for the programs.